Thank you, Mr. Chair.
First of all, let me thank you for the opportunity to come and speak to you today about an issue that is important not just to the Montreal Economic Institute, but to all Canadians.
I also want to note the presence of Cam Guthrie, the Mayor of Guelph, a leader by virtue of his dynamic approach and dedication to implementing policies that offer real solutions to our housing challenges.
In recent years, home sale and rental prices have both risen dramatically, putting significant pressure on the budgets of Canadian families. Households are already dealing with the impact of inflation and the accompanying higher interest rates. Because of these factors, the dream of becoming a homeowner seems more and more like a mirage for many young, and not so young, Canadians.
According to the CMHC, we will need no fewer than 5.11 million new homes over the next eight years to return to 2004 affordability levels. In other words, we will need to build as much in eight years as we did in 24 years. The task seems herculean, but that doesn’t mean we can’t improve things significantly. To do so, we need to act quickly.
Bureaucratic control over the kind of housing that can be built is a hindrance from coast to coast to coast. Economic studies show that, regardless of the price of a new build, it triggers a chain of displacement that frees up housing in every price range, including units that are affordable for the lowest income quintile.
According to a study by Professor Evan Mast of the University of Notre Dame, for every 100 luxury units built, 45 affordable units are freed up for people earning the median salary, including 17 for those in the bottom quintile. That's actually quite a conservative estimate, the most conservative one in the study.
Of course, provinces and municipalities are responsible for the housing and zoning policies that restrict supply. They come up with plenty of reasons to restrict real estate development, such as favouring so‑called human-scale cities or slowing urban sprawl. The fact remains that, every time projects are rejected, delays extended or fees tacked on, that inevitably drives housing prices up. The logic is inexorable.
The federal government is limited in its ability to act on these matters, but it can provide powerful incentives and play a convening role. I would note that a number of prominent politicians in Ottawa have advocated for this idea in recent years, and there has been progress on this front.
However, we must not get sidetracked by short-sighted populist solutions, such as the idea of restricting short-term rentals. That kind of federal intrusion into private law may be popular among a handful of activists, but its effect would be minor, while leaving us less free to make decisions in our own best interests.
In conclusion, allow me to reiterate that we are facing a problem of supply, which is quite simply not plentiful enough. The country is producing housing units at a 1973 pace, but the population has grown by 78% since then. In other words, the population is up by 78%, but housing starts are stagnant at 0%. It's a supply problem.
The only way to make things better is to allow real estate developers to build more units of all kinds.
Thank you. I look forward to answering your questions.